Thoughts on startups by investors that
fund them & entrepreneurs that run them

Blog Archives

Keep It Under Your Hat: Valuation Caps and the $650 Million Sale of MySpace for $125 Million

Entrepreneurs and investors who have spent any time dealing with convertible debt seed financing transactions are likely to have encountered the subject of valuation caps.  In brief, a cap acts to place a limit on the conversion price of a convertible note such that investors are guaranteed a minimum number of shares for their bridge loans if the startup does

Read more >

Valuations 101: The Dave Berkus Method

We recently started a series of posts on establishing the pre-money valuation of pre-revenue startup companies for purposes of investment by seed and startup investors.

Dave Berkus is a founding member of the Tech Coast Angels in Southern California, a lecturer and educator.  He has invested in more than 70 startup ventures.   Dave’s valuation model first appeared in a book

Read more >

Valuations 101: The Venture Capital Method

We recently started a series of posts on establishing the pre-money valuation of pre-revenue startup companies for purposes of investment by seed and startup investors.

Knowledge Is Power: Convertible Note Financing Terms, Part V

As we conclude our convertible note financing series, there are assorted terms commonly seen in term sheets and deal documents that are worth touching on briefly. What seem like boilerplate provisions can be meaningful in some situations. As I’ve noted before, readers joining this series in progress may find it helpful to download the sample term sheet from my firm’s

Read more >

Knowledge Is Power: Convertible Note Financing Terms, Part IV

This week we move on to something near and dear to the hearts of entrepreneurs and investors alike:  The exit, more formally known as a “liquidity event.”  For convertible notes, the only liquidity event we need be concerned with is an acquisition of the startup in the near future, before the maturity date; otherwise, the notes will convert to equity

Read more >

Valuations 101: Scorecard Valuation Methodology

Individual accredited investors in typical angel round deals put personal capital at risk for an equity share of growth-oriented, start-up companies. These angel investors generally invest $25,000 to $100,000 in a round totaling $250,000 to $1,000,000. In 2011, the valuation of pre-revenue, start-up companies is typically in the range of $1.5–$2.5 million and is established by negotiations between the entrepreneur

Read more >

Knowledge Is Power: Convertible Note Financing Terms, Part III

Last week, we took the plunge and began dissecting an example term sheet for a convertible debt financing round piece by piece.  I’ll continue with more specific terms and wrap up next week with some thoughts about recent changes and trends for the future. Readers may find it helpful to download the sample term sheet from my firm’s website and

Read more >

Knowledge Is Power: Convertible Note Financing Terms, Part II

Last week, we gave some attention to the “why” behind convertible note financing for early stage startups.  In this installment, I’ll dig into the “how” by dissecting an example term sheet based on a real deal.  For those playing at home, you may find it helpful to download the sample term sheet from my firm’s website and follow along with

Read more >

Knowledge Is Power: Convertible Note Financing Terms, Part I

The most successful serial entrepreneurs in the world may found three or four, perhaps even eight or ten venture-backed startups over the course of their careers. By contrast, venture capitalists and angel investors typically make scores or even hundreds of investments over the course of their careers. It should therefore come as no surprise that an asymmetry of information exists,

Read more >